Intercity Passenger Rail: Issues Associated with the Recent Settlement between Amtrak and the Consortium of Bombardier and Alstom

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A letter report issued by the Government Accountability Office with an abstract that begins "As part of the Acela high-speed rail program, the National Railroad Passenger Corporation (Amtrak) executed contracts in 1996 with train manufacturers Bombardier and Alstom to build 20 high-speed trains--called trainsets--and 15 electric high-horsepower locomotives; construct three maintenance facilities; and provide maintenance services for the Acela trainsets. The trainsets, locomotives, and facilities contracts totaled $730 million. Bombardier and Alstom, referred to as the Consortium, created the Northeast Corridor Management Service Corporation (NecMSC) to manage the facilities and maintain the trainsets, including supervising Amtrak maintenance employees. Amtrak pays ...
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Description

A letter report issued by the Government Accountability Office with an abstract that begins "As part of the Acela high-speed rail program, the National Railroad Passenger Corporation (Amtrak) executed contracts in 1996 with train manufacturers Bombardier and Alstom to build 20 high-speed trains--called trainsets--and 15 electric high-horsepower locomotives; construct three maintenance facilities; and provide maintenance services for the Acela trainsets. The trainsets, locomotives, and facilities contracts totaled $730 million. Bombardier and Alstom, referred to as the Consortium, created the Northeast Corridor Management Service Corporation (NecMSC) to manage the facilities and maintain the trainsets, including supervising Amtrak maintenance employees. Amtrak pays NecMSC for its management and maintenance services. Concerns about the quality of the Consortium's work and Amtrak's withholding of $70 million in payments resulted in the parties suing each other, each seeking damages of $200 million. After entering into negotiations at the end of 2002, officials from the Consortium and Amtrak signed a settlement agreement in March 2004. In general, under the settlement, the Consortium must complete modifications to the trainsets and locomotives, achieve established performance requirements, provide training to Amtrak staff, and provide and extend warranties. In addition, Amtrak agreed to release up to $42.5 million of the $70 million previously withheld to the Consortium and will assume facility management and trainset maintenance responsibilities as soon as 2006, rather than in 2013 as originally planned, if the Consortium satisfactorily completes its commitments under the settlement agreement. Amtrak has received substantial federal funding in the last several years, and there is considerable congressional interest in Amtrak's financial performance--particularly in the Acela route in the Northeast Corridor, since it generates more revenue for Amtrak than all of its other routes combined. Beginning in fiscal year 2003, the Congress authorized the Secretary of Transportation, through the Federal Railroad Administration (FRA), to provide oversight of Amtrak's use of federal funds and required that Amtrak submit a business plan to the Secretary and the Congress prior to receiving funds. Because of the importance of the settlement agreement to the Acela program and the continued interest of the Congress in Amtrak's financial performance, the Chairman, Senate Committee on Commerce, Science, and Technology, asked us to review the settlement, specifically to (1) delineate the costs Amtrak incurred to prepare for and settle its lawsuit with the Consortium and the estimated costs Amtrak avoided by settling rather than pursuing further litigation, (2) determine the responsibilities of Amtrak and the Consortium under the settlement and the associated benefits and future costs, and (3) identify key challenges related to the settlement and the actions Amtrak and the Consortium are taking to address these challenges."

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Government Accountability Office Reports

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress investigating how the federal government spends taxpayers' money. Its goal is to increase accountability and improve the performance of the federal government. The Government Accountability Office Reports Collection consists of over 13,000 documents on a variety of topics ranging from fiscal issues to international affairs.